Ituran Location and trol .(US:ITRN)2022-05-24 17:56Financial Data and Key Metrics Changes - The company reported revenues of $72.1 million for Q1 2022, a 7% increase from $67.4 million in Q1 2021 [14] - Subscription revenues reached $50.2 million, growing 10% year-over-year [14] - Net income for Q1 2022 was $8.7 million, or 12.1% of revenue, compared to $8.3 million, or 12.3% of revenue in Q1 2021 [18] - EBITDA for the quarter was $19.3 million, representing 26.7% of revenues, an increase of 13% from $17.1 million, or 25.4% of revenues in the previous year [17] Business Line Data and Key Metrics Changes - The aftermarket segment added a record 59,000 subscribers, while the OEM subscriber base decreased by 16,000 due to supply chain issues [15][5] - The overall subscriber base grew by 43,000 net adds, totaling over 1.9 million subscribers [4][14] - Product revenues were $21.8 million, a slight increase of 0.5% compared to Q1 2021 [15] Market Data and Key Metrics Changes - Geographic revenue breakdown for Q1 2022: Israel 53%, Brazil 21%, and the rest of the world 26% [16] - The company faced a 20% decline in new car sales, impacting OEM installations and subscriber growth [22] Company Strategy and Development Direction - The company aims to continue subscriber growth, projecting an addition of 140,000 to 160,000 net subscribers for the year [6] - Focus on expanding usage-based insurance (UBI) services in Israel and replicating success in other markets [10][38] - The company is actively working to secure new financing customers in Latin America, leveraging location-based technology [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macro challenges, particularly supply chain constraints and component shortages, impacting gross margins [7][8] - Despite current challenges, management remains optimistic about long-term growth and profitability, expecting improvements in inventory costs and margins in the future [30][32] Other Important Information - The gross margin on subscription revenues improved to 55.9% from 55.1% year-over-year, while product gross margin decreased to 23.7% from 25.4% [17] - Cash flow from operations for Q1 2022 was $7 million, with a cash position of $45.2 million as of March 31, 2022 [19] - A dividend of $0.14 per diluted share was declared, totaling approximately $3 million [20] Q&A Session Summary Question: What drove the OEM subscriber losses and future expectations? - Management indicated that the decline in OEM subscribers was due to a 20% drop in new car sales, which is expected to continue in the near term due to ongoing supply chain issues [22][23] - They anticipate a rebound in sales once component shortages are resolved, leading to potential growth in subscriber base [24] Question: Impact of product margins and future expectations? - Management quantified the impact of shortages on gross profit, noting a 2% decrease in product gross margin, equating to about $1 million in lost profitability [27][28] - They expect gradual improvement in margins starting in the next quarter, with a more optimistic outlook for mid to long-term profitability [30][32] Question: UBI market potential and strategy? - Management described UBI as a differentiator, with current focus on Israel and plans to expand into Latin America, though they expect it to take time to gain traction [36][38]